ATO Interpretative Decision

ATO ID 2004/742

Excise

• This document incorporates revisions made since original publication. View its history and amending notices, if applicable.

Issue

Is the placing of rubble around water troughs on an agricultural property an 'agricultural construction activity' as defined in paragraph 25(d) of the Energy Grants (Credits) Scheme Act 2003 (EGCSA)?

Decision

Yes. The placing of rubble around water troughs on an agricultural property is an 'agricultural construction activity' as defined in paragraph 25(d) of the EGCSA.

Facts

An entity operates a construction company and is contracted by a farmer to maintain water troughs on an agricultural property. The water troughs are for use in a core agricultural activity.

The entity places rubble on the ground around existing water troughs, with the purpose of keeping the troughs in good condition by preventing damage caused by water spilling from them. The troughs will become unstable and unusable if the ground around them becomes too moist.

Reasons for Decision

Section 53 of the EGCSA provides that, subject to the conditions and restrictions specified in the Energy Grants (Credits) Scheme Regulations 2003, an entity is entitled to an off-road credit if they purchase or import into Australia off-road diesel fuel for a use by them that qualifies, including 'agriculture'.

'Agriculture' is defined in section 22 of the EGCSA to include an 'agricultural construction activity', which is defined in turn in section 25 of the EGCSA.

The most pertinent activity in section 25 of the EGCSA is set out in paragraph 25(d), which states that the expression 'agricultural construction activity' includes:

the construction or maintenance of dams, water tanks, water troughs, water channels, irrigation systems or drainage systems including, without limiting the generality of the foregoing, water pipes and water piping for use in a core agricultural activity if the construction or maintenance:

(i)

is carried out on an agricultural property where the core agricultural activity is carried on; and

(ii)

is carried out by the person who carries on the core agricultural activity or by a person contracted by that person to carry out the construction or maintenance; or...

The entity is not constructing water troughs, therefore in order to fall within paragraph 25(d) of the EGCSA, the placing of rubble must first constitute 'maintenance' of the water troughs.

The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW defines 'maintenance' as: 'the act of maintaining' and 'maintain' as:

1.

to keep in existence or continuance; preserve; retain;

2.

to keep in good condition, operation, or force; keep unimpaired: ...

In this case, the placing of rubble around water troughs to protect the ground around the troughs from damage caused by water spilling from the troughs amounts to 'maintaining' the water troughs, as it has the purpose of keeping the troughs in good condition, by preventing them from becoming unstable and unusable if the ground around them becomes too moist.

The placing of rubble around water troughs would therefore fall within the meaning of 'maintenance' of water troughs, as required by paragraph 25(d) of the EGCSA.

As, in this case:

•

the water troughs are for use in an core agricultural activity

•

the maintenance of the water troughs occurs on the agricultural property where the core agricultural activity is carried on, and

•

the maintenance of the water troughs is carried out by a person contracted to the farmer who carries on the core agricultural activity

all the other requirements of paragraph 25(d) of the EGCSA are met. Accordingly, in this instance, the placing of rubble around water troughs on an agricultural property is an 'agricultural construction activity' as defined in paragraph 25(d).

Legislative References:
Energy Grants (Credits) Scheme Act 2003
   section 22
   section 25
   paragraph 25(d)
   section 53

Other References:
The Macquarie Dictionary, 2001, rev. 3rd edn, The Macquarie Library Pty Ltd, NSW

Keywords
EGCS agricultural construction activity
EGCS agricultural maintenance
EGCS agriculture
EGCS off-road diesel
EGCS primary production

Business Line:  Indirect Tax

Date of publication:  10 September 2004

ISSN: 1445-2782